Accepted by the Vice-Chairperson, July 25, 2005
Voluntary Compliance Undertaking of Novartis Pharmaceuticals Canada Inc. to the Patented Medicine Prices Review Board

1. Product Summary

1.1. Starlix (nateglinide) is a patented medicine sold in Canada by Novartis Pharmaceuticals Canada Inc. (Novartis Pharma).

1.2. Starlix is indicated as monotherapy in addition to diet and exercise to lower the blood sugar in patients with type 2 diabetes mellitus who are not controlled satisfactorily by diet and exercise alone. Starlix is also indicated in combination with metformin in patients not controlled satisfactorily on diet, exercise and either nateglinide or metformin alone. Starlix is classified in the WHO ATC index 2002 as a member of the 4th level ATC class A10BX: Other glucose lowering drugs. Starlix is supplied in 60 mg, 120 mg and 180 mg tablets (DINs 02245438, 02245439 and 02245440).

1.3. Canadian Patent 2,114,678 pertaining to Starlix was granted to Ajinomoto Co. Inc., Japan on April 27, 1999 and will expire on February 1, 2014. Novartis Pharma is the patentee for purposes of the Patented Medicine Prices Review Board (PMPRB).

1.4. Health Canada issued a Notice of Compliance for Starlix on February 13, 2002. Novartis Pharma began selling Starlix on March 1, 2002.

2. Application of the Excessive Price Guidelines

2.1 The PMPRB's Human Drug Advisory Panel (HDAP) recommended that Starlix be classified as a category 3 new medicine and that GlucoNorm (repaglinide) be the sole comparator for purposes of a Therapeutic Class Comparison (TCC) test.

2.2 In accordance with the PMPRB's Guidelines, Board Staff conducted a TCC test for the 120 mg and 180 mg strengths using GlucoNorm as the sole comparator. A Reasonable Relationship (RR) test was conducted for the 60 mg strength. The introductory prices of Starlix 60 mg and 120 mg exceeded comparable prices of GlucoNorm.

2.3 At the time of introduction in 2002, the 60 and 120 mg strengths of Starlix were sold in five of seven reference countries and the prices are summarized in the following table:

2.4 For purposes of the Guidelines, the maximum non-excessive prices of Starlix 60 mg and 120 mg were established at prices corresponding to the lowest international price of $0.4754.

2.5 Based on the MNE introductory prices outlined above, the CPI-adjusted MNE prices for 2003 and 2004 are $0.4887 and $0.4973 respectfully; the MNE price for 2005 is $0.5044.

2.6 Over the period March 2002 to June 2005, Novartis received excess revenues totalling $174,306.29.

3. Position of Patentee

3.1 This Voluntary Compliance Undertaking (VCU) constitutes no admission by Novartis Pharma that the price of Starlix 60 mg and 120 mg tablets is or was excessive for purposes of the Patent Act.

4. Terms of the Voluntary Compliance Undertaking

4.1 Under the terms of this VCU, Novartis Pharma undertakes as follows:

• To reduce the price of Starlix 60 mg and 120 mg tablets so that the average transaction price in 2005 does not exceed the 2005 MNE price of $0.5044.
• Within 30 days of acceptance of this VCU, to make a payment of $174,306.29 to Her Majesty the Queen in Right of Canada for the excess revenues that accrued during the period March 2002 through June 2005.
• To ensure that while patented, the average transaction prices of Starlix in Canada in future years does not exceed the maximum non-excessive prices calculated in accordance with the Guidelines.

Novartis Pharmaceuticals Canada Inc.
Signature: Original signed by
Company Officer: Rajiv Desilva
Position: President
Date: July 21, 2005